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The California legislature has been busy of late, passing a series of new laws that will likely prompt employers to review and revise their employment agreements, reassess their strategies with respect to sexual harassment claim litigation and reevaluate certain pay practices.

Contractual Choice of Law Provisions Restricted

On September 25, 2016, Governor Jerry Brown signed Senate Bill 1241 (to be enacted as Labor Code §925), which may require certain employers to amend their standard employment and arbitration agreements.

Applying to all employment contracts entered into, modified or extended on or after January 1, 2017 regarding employees who primarily reside and work in California, this law prohibits employers from requiring as a condition of employment that an employee agree to a forum-selection or choice-of-law provision that would require the employee to adjudicate a claim either outside of California ("forum selection") or pursuant to the law of another jurisdiction ("choice of law"). Such provisions are voidable by the employee. In addition to injunctive relief, a court may award attorneys’ fees to any employee who is enforcing his or her rights under this law. Only employees individually represented by counsel in negotiating the terms of the employment agreement are excluded from the purview of this law.

It is not uncommon for employers with headquarters in other states to include choice of law provisions in employment agreements for individuals working in California. While enforcing choice-of-law and forum-selection provisions was already an uphill battle in California courts, this law now bars such provisions. Except for choice-of-law and forum-selection clauses negotiated with an employee "individually represented by legal counsel" such provisions will be unenforceable if included in any agreement executed, modified or extended after January 1, 2017. Employers should review the various types of agreements typically required as a condition of employment to ensure compliance with the new legislation.

Settlement Agreements Concerning Certain Sexual Harassment Claims

If your company is considering settlement of a sexual harassment claim, keep in mind that California law prohibits confidential settlement agreements in civil actions with a factual foundation establishing a cause of action that may be prosecuted as a felony sex offense. While this law provided that the prohibition on confidentiality did not affect a party's ability to enter into settlement agreements requiring the nondisclosure of an amount paid to settle the claim, that is changing. On September 30, 2016, Governor Jerry Brown signed into law Assembly Bill 1682, which repeals the carve-out for the nondisclosure of settlement amounts. Employers wary of public dissemination of their past settlement amounts should assess how this legislation impacts their litigation and resolution strategy in sexual harassment lawsuits.

Wage Equality Act of 2016

On September 30, 2016, Governor Brown signed into law Senate Bill 1063 (amending Labor Code §1197.5 and §199.5), which extends the Fair Pay Act's requirements to race and ethnicity in a manner nearly verbatim to those in the Act between male and female employees. Under the new law, California employers are barred from paying their employees a wage rate less than the rate paid to workers who are a different race or ethnicity for "substantially similar work" unless an employer can prove the different wage is due to one or more specified bona fide circumstances. That same day, Governor Brown also signed Assembly Bill 1676 (amending Labor Code §1197.5), which prohibits an employer from justifying any disparity in compensation under the bona fide factor exception by citing to an employee's prior salary alone. Employers should consider undertaking those efforts launched in response to last year's Fair Pay Act, including, but not limited to, auditing pay records, updating their employee handbooks and providing supervisory training.

If you have questions regarding the issues in this article, please contact Brendan G. Dolan +1 (415) 749 9530 or any Vedder Price attorney with whom you have worked.

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Thomas H. Petrides